In its response to the Invest 2035 green paper, the Institute said that a new strategy with policies and incentives that change too frequently would deter businesses from investing, stifling economic growth.
The government’s strategy – which will be published in Spring 2025 – should therefore demonstrate long-term policies to encourage investment and boost growth over a 10-year period, ICAEW said.
The UK economy “thrives when it embraces what it does best and encourages open and free trade across the world”, ICAEW added in its submission.
As well as promoting stability, the government’s industrial strategy should develop skills and harness data for measurement and intervention, ICAEW said.
ICAEW added that the industrial strategy must also include a commitment from government to follow through on its existing policy commitments, finish projects that have been started, and invest sufficient resources in government departments and the private sector.
Iain Wright, ICAEW Managing Director, Reputation and Influence, said:
“A modern industrial strategy is critical to ensuring the foundations are in place to generate strong economic growth. It is always difficult to strike the right balance between policies that help the entire economy, or targeted intervention in certain sectors which boosts growth in those areas in which we in the UK have a global advantage. We think that with this green paper the government has got that balance about right.
“When I speak to businesses they tell me that they want an economy that is underpinned by certainty, clarity and stability, with the right long-term incentives to influence investment, employment and growth. But a strategy that lacks a clear plan, or includes policies and incentives that change too frequently, is likely to have a chilling effect on investment. Businesses can’t and won’t invest when there is fast policy churn; the industrial strategy has to address that.
“We were delighted to see recognition of the professional and business services sector as one of the areas with the highest growth opportunity for the economy and business, as it is key to the building of a highly-skilled economy. ICAEW members advise three million businesses across the country and know how to boost productivity, take opportunities and create growth to build the tax base, increase employment and share prosperity.
“We want the UK to be the best place to invest and to start, run and grow a business. Our members have enriched our response through their insights and experiences. We’re pleased to have contributed to this process and stand ready to play our part going forward.”
Higher education should be ninth growth sector
ICAEW also urged the government to include higher education as the ninth sector in the industrial strategy, in addition to the eight growth-driving sectors already prioritised for a targeted approach to investment.
The sector, worth £41.9bn since the 2021/22 academic year, would provide a major export value as well as wider benefits to the UK economy through access to leading international talent and expertise, the Institute said. [1]
The UK is second only to the US for the excellence of its universities, and generates economic activity by attracting talent and through research and innovation, ICAEW added.
ICAEW is also pleased the government has included the professional and business services sector, which accounted for one in seven UK jobs last year, in its list of growth sectors.
Improving access to high-level skills is critical to boosting the economic performance of these sectors, therefore action is needed to help people more easily plot their path from school leaver to skilled worker. To measure this, the industrial strategy should reintroduce the metric tracking the proportion of those who hold a technical qualification as their highest educational attainment.
Security strategy essential
Following a series of ‘once-in-a-lifetime' shocks, including the ongoing war in Ukraine and the global financial crisis, the Institute emphasised the importance of injecting resilience into the economy.
The strategy should identify, ICAEW argued, those key sectors and value chains likely to be compromised by geopolitical uncertainty and subsequently exposed to issues such as supply-side challenges and price hikes.
The Institute said the new industrial strategy should also:
- Support productivity growth and innovation in the accountancy sector by improving data sharing process with government departments, introducing a digital-identity system, providing greater insight into how AI regulation will work in practice and leveraging skills bootcamps;
- Task the new Industrial Strategy Advisory Council (ISAC) with accurately monitoring performance of the strategy against a set of well-defined metrics, including specific barriers to investment;
- Deliver a tax roadmap for businesses that identifies areas holding back business activity and growth, and potential tax policy options, such as reforms to business rates and VAT;
- Put ISAC on legislative footing, to make it difficult for any subsequent government to abolish it without taking parliamentary steps to repeal it;
- Set out strategies for planning reform, housing, infrastructure, energy security and transport, and investigate barriers to infrastructure investment in pension fund risk profiles;
- Grant cluster status for cities and regions to champion technologies to enable better integration and targeting for existing government interventions, including local skills improvement plans, freeports and investment zones and research and development (R&D) investment;
- Commit to spending 3% of GDP on R&D, and providing a roadmap for achieving this, including levers relating to regulation and taxation, and support from HMRC; and
- Explore a new version of the growth voucher scheme and consider more bespoke resources to facilitate scale-ups in the UK to ensure access to financial advice is more readily available.
You can view ICAEW’s full consultation submission here.
ENDS
Notes to editors:
CONTACT: ICAEW media office tom.mackintosh@icaew.com or 07866 853841
- A 2023 report from London Economics found that the total benefit to the UK from the 2021/22 first-year international students over the duration of their studies was approximately £41.9bn, while estimated total costs were £4.4bn.